Corona Virus Impacting "The Cloud"

While data center staff have been classified as essential, like medical staff and grocery store staff, construction is taking a bit of a hit. In recent weeks, Facebook, Google, and Apple have announced a slowing of construction of major new data centers in the U.S. and Europe.

The problem, as it turns out, is not because construction is being ordered halted, or even due to a lack of IT equipment, but because other components of the supply chain like fiber optics, batteries, and racks are scarce.

They are not stopping because they want to, but they don’t have materials to finish. That’s important but not the same as shutting down or not finishing buildings under way.

Building a data center is not done on a whim. These facilities are huge and run in the billions of dollars. Most of the data centers under construction now have been under construction for six to 18 months. People are more unwilling to break new ground but even that is not cause for alarm because there's an over-abundance of capacity, so issues won’t show up until 2021 or 2022. There has been more data-center space built for cloud and colocation operators in the last three years than in all history. They built enough capacity and 2020 wasn’t going to be a big year for construction anyway. There is space available and no shortage of bandwidth and capacity. Now if nothing is built in the next two years, then yes, that might be a problem. In addition to all the new capacity, the new hardware is so much better than older gear that data-center operators are getting much more out of each square foot. “In a new data center, they can get three to four times as much assets in the same space compared to even a five-year-old enterprise data center. The new capacity is more efficient so there is more of a cushion,

The bottom line is right now there is a good amount of capacity and if it is managed effectively, operators can accommodate changes in loads right now and going forward. Japan is the exception.

Japan has a healthy IT industry and the third-largest economy behind the U.S. and China, but it has yet to produce its own cloud provider on par with AWS or Alibaba. So American companies are looking at the country as a greenfield opportunity. Earlier this month Equinix announced a $10 billion joint venture with GIC, a Singapore financing firm, to build three hyperscale data centers in Tokyo and Osaka for the world’s largest hyperscale cloud platforms. Equinix didn’t say which, but the big four cloud providers (AWS, Microsoft, Google, IBM) all use Equinix for extra capacity. Its chief rival, Digital Realty Trust, has been working with Mitsubishi to finance and construct new data centers in Tokyo and Osaka as well.

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